Big changes on the horizon

Published 2:28 pm, Monday, March 11, 2013

You probably know that the sweeping health care reform package known as the Affordable Care Act will by fully implemented by 2014. But what does that mean? What health care changes are ahead?

Below is a helpful list of some the changes that have either been implemented already, or will be implemented by 2014.

Limits On Itemized Tax Deductions: The rules for itemizing deductions on federal income tax returns have changed. Beginning this year, taxpayers can claim deductions for medical expenses not covered by health insurance when they reach 10 percent of adjusted gross income, up from 7.5 percent. The law waives the increase for those 65 and older for tax years through 2016.

Changes In Flexible Spending Accounts: Starting this year, there is a new cap of $2,500 on flexible spending accounts (FSA), which permit taxpayers to set aside tax-free dollars for medical expenses (eye glasses, orthodontic work, speech therapy, etc.) that aren't reimbursed. In future years, the $2,500 cap will increase by the annual inflation rate. You also can no longer use an FSA to cover the cost of over-the-counter drugs unless prescribed by a doctor.

Medicare-Related Tax Increases: Two new Medicare-related taxes impact earners with adjusted gross income above $200,000 for individuals or $250,000 for married couples who file jointly. Starting this year, employees will pay an extra 0.9 percent Medicare payroll tax on wages. There's also a new 3.8 percent tax on unearned income, including investments, interest, dividends, annuities, rent, royalties, certain capital gains, and inactive businesses. Some exemptions apply, including income from tax-exempt bonds, veteran's benefits, and qualified plan distributions from an IRA or 401(k). The new tax does not apply to the sale of a principal residence, except in rare cases.

Standard Benefit Explanations: Health insurers must provide policyholders with standard disclosure forms (no more than four pages) summarizing benefits and coverage, including information about deductibles, co-payments, out-of-pocket limits and excluded services. The standard format allows consumers to make informed decisions based on apples-to-apples comparisons of health plans. Insurers must also disclose typical out-of-pocket costs for two scenarios: having a baby and treating type 2 diabetes. Future years will include coverage estimates for other conditions, such as heart attack or breast cancer.

Phasing Out Annual Dollar Limits: Effective this year, an insurance company must pay no less than $2 million a year for an individual's medical expenses. The law eliminates all annual limits in 2014.

Health Insurance Exchanges: Connecticut is among a handful of states taking the lead in implementing health care reform with the establishment of the Connecticut Health Insurance Exchange, which recently adopted "Access Health CT" as its new consumer-friendly name. The exchange is an online marketplace where individuals and small businesses can compare and buy health plans. The law requires most Americans to buy health insurance or pay a tax beginning in 2014.

The exchange will announce later this year which carriers meet the requirements to sell health plans on the online marketplace. Open enrollment begins Oct. 1 for coverage beginning January 2014.

Prescription Drug Savings For Older Adults: In 2013, Medicare recipients who reach the prescription coverage gap -- known as the "donut hole" -- will get a 52.5 percent discount on prescription drugs and a 21 percent discount on generic drugs. Since the law's passage about three years ago, state residents with Medicare have saved more than $62 million on prescription drugs. A total of 32,451 state residents with Medicare saved $26 million on brand-name prescription drugs during the first nine months of 2012, for an average savings of $803 per person. The "donut hole," the point at which people must start paying for their medications, disappears by 2020.

Expanded Medicaid Coverage: Connecticut was the first state to receive federal approval to expand Medicaid enrollment even before the Affordable Care Act takes effect. States must decide whether to expand Medicaid by 2014, with the federal government paying 90 to 100 percent of the costs. The number of low-income adults receiving Medicaid has grown from an estimated 47,000 to about 86,800 from July 2010 to December 2012, reports the state Department of Social Services. Some lawmakers question whether the increase stems from a bad economy or if people are deliberately moving to Connecticut to receive benefits. The Centers for Medicare and Medicaid Services in March denied a request by Connecticut to institute a $10,000 asset test and parental income reporting for applicants.

Coverage For Pre-Existing Conditions: As of August 2012, a total of 484 previously uninsured state residents locked out of the coverage system for more than six months because of a pre-existing condition are now insured through the Pre-Existing Condition Insurance Plan created by the federal health reform law. Although insurers cannot deny coverage to children under 19 with a pre-existing condition, discrimination against adults with pre-existing conditions doesn't kick in until 2014.

Consumer Rebates: Consumers whose private insurance carriers do not spend at least 80 percent of premium dollars on health care and quality improvements can expect to receive a rebate in August. Last year, 137,452 Connecticut consumers (individuals, small businesses and large employers) received nearly $13 million in rebates (for an average of $168 per person) from insurers that spent too much money on administrative costs rather than on health care. The rebates do not apply to people with self-insured health plans.

Scrutinizing Premium Increases: Insurance companies seeking premium increase rates of 10 percent or more trigger an automatic review by the insurance department to determine if the request is reasonable. The state has received $1 million under the new law to fight unreasonable premium increases.

Banning Lifetime Dollar Limits: Lifetime dollar limits on health benefits are banned. Already, 1.4 million state residents with insurance -- including 525,000 women and 367,000 children -- no longer need to worry about going into debt when their coverage runs out.

Consumer Protection: The Connecticut Office of the Health care Advocate, the independent state agency that helps consumers with insurance issues, generated $6.3 million in savings for consumers in 2012. OHA received federal funds to assist additional residents. Also, the insurance department's consumer affairs unit helps consumers with health insurance denials recover about $4 million each year. Insurers can no longer cancel coverage if you get sick or make an honest mistake on your application. You also can appeal insurance company decisions to an independent reviewer.

Tax Credits For Small Business Owners: Small businesses can apply for a 35 percent tax credit (50 percent by 2014), while nonprofit organizations can receive a 25 percent credit (35 percent by 2014). About 36,620 small businesses employing 192,400 state residents are eligible to receive up to $166 million in tax credits to defray the cost of insuring employees. To qualify, a small business must pay at least half of their employees' health insurance costs and have fewer than 25 people earning an average of less than $50,000 a year.

Community Health Centers: Health centers that serve the state's most vulnerable residents have received $56 million under the health care reform law to support ongoing operations, establish new sites, expand services and fund capital improvements. In Connecticut, 13 health centers operate 184 sites, providing preventive and primary health care services to 315,992 people.

Information for this report came from the U.S. Department of Health and Human Services, Kaiser Family Foundation, Connecticut Department of Social Services, Connecticut Health Insurance Exchange, Connecticut Insurance Department, Connecticut Office of the Health care Advocate and Connecticut Office of Health Reform and Innovation.

This story was reported under a partnership with the Connecticut Health I-Team (www.c-hit.org).